On of the big questions with the new administration is whether there will be new legislation restricting or completely getting rid of payday loan companies. This new administration portrays itself as a protector of consumer rights, and there is more concern about legislation changing the current industry.
According to Obama’s website, the President is planning on demanding more disclosure from payday loan companies and institute a 36% cap on all American loans. This site also states that he will “encourage banks, credit unions and Community Development Financial Institutions to provide affordable short-term and small-dollar loans and to drive unscrupulous lenders out of business.”
First of all, I can’t understand why the President would want to force a valid industry out of business. I would assume that the main goal would be to maintain current employment and encourage greater opportunities for employment, not to get rid of thousands of American citizen jobs.
Rates are high to make a profit. If they dip lower and lower,companies-not just payday loan companies-will lose money. Let’s name a couple other industries and situations that have higher APR’s: credit card companies, bounced checks, negative credit reports-thus high interest car and home loans, negative checking balance fees, etc.
The difference in these is that, while these APR fees are in the hundreds, like payday loans, they are levied upon people for having financial struggles. Payday loans are accepted by people freely, with a full understanding of what the fee is beforehand.
Payday loan services are available to those people who need small, short-term loans. There are available because of need. Outlawing that financial choice is just irresponsible. Perhaps the rates will be capped, I guess we’ll see. But, encouraging legislation that will drive payday loan companies out of business is ridiculous, and is ultimately taking away a useful service and legitimate jobs.
